Income

Taxation for
Individuals
Classification of Taxpayers
• Manny, a Filipino businessman, went on a business trip abroad and stayed
there most of the time during the year.
• Kyla, a Filipino professional singer, held a series of concerts in various
countries around the world during the current taxable year. She stayed
abroad most of the time during the year.
• Efren, a Filipino “cue” artist went to Canada during the taxable year to train
and participate in the world cup of pool. He stayed there most of the time
during the year.
• Due to his expertise, Engr. Pedro D. Magiba (a freelancer) was hired by a
foreign petroleum contractor in Thailand to provide technical assistance for
two months from February to March. He was hired again for the months of
June-July and October-December of the same taxable year.
Classification of Taxpayers
• In October 2018, Mr. Bald Nha, an American basketball coach, was hired as
a team consultant by on of the teams in the Philippine Basketball
Association (PBA) for one conference which will last for a period of not
more than three (3) months from October to December 2018. His coming to
the Philippines was for a definite purpose. However, he was subsequently
chosen to coach Gilas, the Philippine’s national basketball team and lead the
country’s campaign for the upcoming World Cup Qualifying Tournament to
be held in Manila in July 2019.The American mentor intends to leave the
Philippines as soon as his job is finished.
• Mr. Almansor Sebastian, an Iranian and a resident of Tehran, Iran stayed in
the Philippines from July 1-15, 2018 to watch the 2018 FIBA Asia World
Cup Qualifier held in MOA. During his stay, he bought equity investments
from Alpha and Delta Corporations (domestic corporations). He likewise
invested in a mutual fund of Banko de Isla de Pilipinas, a local bank.
Sources of Income
Income & Expenses Amount
Gross business income, Philippines 5,000,000.00
Gross business income, Canada 2,000,000.00
Gross business income, Singapore 1,000,000.00
Business expenses, Philippines 3,000,000.00
Business expenses, Canada 1,000,000.00
Business expenses, Singapore 500,000.00
Sources of Income
January to June Philippines Canada
Gross Income 5,000,000.00 2,000,000.00
Allowable Deductions 2,000,000.00 1,000,000.00
July to December Philippines Canada
Gross Income 2,000,000.00 3,000,000.00
Allowable Deductions 1,000,000.00 1,200,000.00
1. January to June: Resident Citizen; July to December: Nonresident Citizen
2. January to June: Nonresident Citizen; July to December: Resident Citizen
 Purely Self-Employed and/or Professionals Mixed Income Earner

Purely Self-Employed
Compensation
and/or Professionals

3Million & Above

3Million & Below Above 3Million
Below 3Million

Regular Income Tax OR

8% tax on Gross
Regular Income Tax Regular Income Tax
+ Regular
Income Tax OR
8% tax on
Regular
Income Tax
sales/receipts and other Gross
operating income in sales/receipts
excess of Php 250,000.00 and other
operating
in lieu of the graduated income
tax rate
Types of Income: Ordinary Income
Income & Expenses Amount
Gross Sales 2,800,000.00
Cost of Sales 1,500,000.00
Operating Expenses 750,000.00
Types of Income: Ordinary Income
Income & Expenses Amount
Gross Sales 5,000,000.00
Cost of Sales 2,250,000.00
Operating Expenses 1,250,000.00
Types of Income: Ordinary Income
Pedro signified his intention to be taxed at 8% income tax rate on gross sales
in his 1st quarter income tax return. However, his gross sales during 2018
taxable year exceeded the vat threshold of P3M as provided in his quarterly
records as follows:
Income & Expenses Q1 Q2 Q3 Q4 TOTAL
Sales 500,000.00 500,000.00 2,000,000.00 3,500,000.00
Cost of Sales 300,000.00 300,000.00 1,200,000.00 1,200,000.00
Gross Income 200,000.00 200,000.00 800,000.00 2,300,000.00
Operating Expenses 120,000.00 120,000.00 480,000.00 720,000.00
Net Taxable Income 80,000.00 80,000.00 320,000.00 1,580,000.00
Types of Income: Ordinary Income
Income & Expenses Amount
Compensation Income 900,000.00
Gross Sales 2,800,000.00
Cost of Sales 1,500,000.00
Operating Expenses 750,000.00

1. Graduated Tax Table

2. Opted to be taxed at 8% of Gross sales or Receipts
Types of Income: Ordinary Income
Income & Expenses Amount
Compensation Income 900,000.00
Gross Sales 5,000,000.00
Cost of Sales 2,250,000.00
Operating Expenses 1,250,000.00
Types of Income: Identification
Income (Resident Citizen) TAX TYPE TAX RATE
1. Interest from peso bank deposit, BDO, Makati
2. Interest from US dollar bank deposit, BPI-Manila
3. Interest from a foreign currency deposit in Japan
4. Interest from money market placement, Philippines
5. Interest from a foreign currency deposit in
Australia by a nonresident citizen
6. Interest from overdue accounts receivable,
Philippines
7. Compensation income, Philippines
8. Business Income, Philippines
9. Royalties, in general, Davao City
10. Royalties, books published in Manila
Types of Income: Identification
Income (Resident Citizen) TAX TYPE TAX RATE
11. Prizes amounting to P30,000.00, Philippines
12. Prizes amounting to P10,000.00, Philippines
13. Prizes amounting to P40,000.00, USA
14. P30,000 other winnings, Philippines
15. P10,000 other winnings, Philippines
16. P15,000 other winnings, Canada
17. P10,000 Philippine Lotto/PCSO winnings
18. P100,000 PCSO winnings by a resident alien
19. Philippine Lotto/PCSO winnings by a nonresident
alien not engaged in trade or business
20. Lotto winnings in London
Types of Income: Identification
Income (Resident Citizen) TAX TYPE TAX RATE
21. Interest income from long-term deposit by a resident alien
22. Interest income from long-term deposit by a nonresident
alien not engaged in trade or business
23. Interest income from a government issued bonds with
maturity of ten (10) years)
24. Interest income from bonds issued by PLDT with maturity of
ten (10) years
25. Dividend income from a domestic corporation
26. Dividend income from a resident foreign corporation
27. Dividend income from a nonresident foreign corporation
28. Dividend income from a domestic corporation by a
nonresident alien engaged in trade or business
29. Dividend income from a domestic corporation by a
nonresident alien not engaged in trade or business
 Income & Expenses Amount
Gross business income, Philippines 1,000,000.00

Types of Gross business income, USA

Business expenses, Philippines
500,000.00
700,000.00

Income: Business expenses, USA

Compensation income, Philippines
430,000.00
600,000.00
Ordinary Dividend income from a domestic corporation 50,000.00

Income Dividend income from a foreign corporation

Interest income from peso bank deposit-Philippines
40,000.00
20,000.00

+ Passive Interest income from bank deposits abroad

Interest income from FCDS deposits
30,000.00
40,000.00
Income Raffle draw winnings 10,000.00
PCSO winnings 200,000.00
Creditable withholding taxes on business income 125,000.00